What is Bitcoin and what is it used for?

DATE: Jan, 1   COMMENTS: 0   AUTHOR: Allan Azarola

Bitcoin is what is known as crypto currency.  That means that its currency with no banks involved and its anonymous and all transactions are done online.  It is completely digital, allowing transactions to be instant, anonymous and unregulated internationally.   Of course, this has advantages and disadvantages.    Being decentralized, internationally recognized, this type of currency can be freely traded without any restrictions and without anyone ever having to know who is holding what.  That also means it is not taxed.  It also means that the holders must beware that it could fall apart at anytime without any government or bank offering any type of bailout.    

In 2009, a person using the name Satoshi Nakamoto established this type of currency.  It was done through open source software and there is a public ledger of its trading.  Bitcoin can be used for buying goods or services or held for investment purposes.  As of 2015 over 100,000 merchants and companies worldwide accept Bitcoin as payment.  The benefit to small businesses accepting this as payment is that it is like credit card payments but with no fees.

Bitcoins are bought and sold on exchanges in addition to being used as actual currency.  It is a sort of Forex trading because Bitcoins can be bought or sold for any other type of currency.  People can send them to each other digitally like any other type of digital money transfer.  Bitcoins are “kept” in a virtual wallet similar to a bank account.  Just like bank accounts are theoretical, your physical money does not actually sit in that bank, so are bitcoin wallets.  Centralized computers keep track by a code assigned to each person who holds bitcoins and every transaction is confirmed matching up these codes.

There are prizes of bitcoins awarded to people for solving complex computer and math problems.  Obtaining bitcoins in this manner is called “mining”.  People in countries with high inflation purchase bitcoins in their currency to prevent their earnings from losing its value.  This is a very practical way for bitcoin to be used.  Another practical use of bitcoin is transferring large sums internationally.  When you transfer money internationally through a traditional bank, there are hefty fees involved.  Using bitcoin has been able to save companies those significant fees.

One of the biggest obstacles is the risk.  Hackers have gotten into computers holding bitcoin wallets and stolen large sums.  People have accidentally wiped out bitcoin wallets from their hard drives. As with anything else, there are positives and negatives, and ups and downs. Since currency is only valuable if you can use it for goods and services and what you can buy with it determines how valuable it is, for bitcoin holders, the more it takes off the better.   When more businesses see the benefits of using bitcoin, its value increases.  It will be interesting to see in the future if government does get more involved and what effect that will have on this form of currency.

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